TrustCo Bank Corp NY Posts Robust Earnings Momentum

TrustCo Bank Corp NY ((TRST)) has held its Q4 earnings call. Read on for the main highlights of the call.

TrustCo Bank Corp NY’s latest earnings call painted a picture of a bank enjoying robust core momentum, underpinned by strong net income growth, expanding margins, and steady loan and deposit gains. Management emphasized that these operational strengths and rising recurring fee income more than offset concerns around modestly higher non-performing loans, a reduced allowance coverage ratio, slightly lower capital levels, and a guided uptick in expenses for 2026. Overall, the tone was confident yet measured, with executives acknowledging emerging risks but underscoring that the earnings engine remains firmly in gear.

Strong Net Income Growth and Improving Profitability

TrustCo reported fourth-quarter net income of $15.6 million, a 38% increase year over year, signaling a sharp improvement in profitability. This performance translated into a return on average assets just under 1.0% and a return on average equity of essentially 10%, metrics that are solid for a conservatively run regional bank. Management highlighted this earnings lift as evidence that strategic balance sheet positioning and disciplined pricing are translating into better bottom-line results for shareholders.

Net Interest Income and Margin Expansion Fuel Core Earnings

A key driver of the stronger earnings was net interest income, which climbed 12.4% year over year to $43.7 million. The net interest margin expanded by 22 basis points to 2.82%, reflecting both higher yields on earning assets and lower funding costs. TrustCo’s yield on interest-earning assets rose to 4.24%, while the cost of interest-bearing liabilities fell to 1.84%, an uncommon combination in a volatile rate environment. Management framed this as proof that the bank’s funding base and asset mix are well positioned to capture spread, supporting ongoing earnings growth.

Loan Growth and Healthy Portfolio Mix

Average loans reached an all-time high of roughly $5.2 billion, up about 2.5% year over year, underscoring steady credit demand in key segments. Home equity lines grew 13.5%, residential first mortgages edged higher by 1.2%, and commercial loans rose 8.6%, giving the portfolio a balanced mix of consumer and business exposure. On a quarter-over-quarter basis, actual loans increased $60.7 million, driven largely by purchase mortgages. Management portrayed this as disciplined, relationship-based growth rather than volume for volume’s sake, supportive of both earnings and asset quality.

Deposit Growth Supports Funding Stability

Total deposits ended the quarter at $5.6 billion, up $166 million from a year earlier, providing a stable and growing funding base for loan expansion. This deposit growth helps TrustCo sustain its margin improvement while avoiding excessive reliance on higher-cost wholesale funding. Executives reiterated their focus on competitive deposit offerings to maintain customer loyalty and support future lending opportunities, a key differentiator in a market where funding pressure remains a concern for many banks.

Share Repurchases and Dividends Underscore Shareholder Focus

TrustCo continued to prioritize capital return, repurchasing 1,000,000 shares year-to-date, representing about 5.3% of common shares. Of that, 533,000 shares were bought under the latest program. The board renewed the repurchase authorization for 2026, allowing buybacks of up to 2,000,000 shares, or roughly an additional 11.1% of outstanding shares. Alongside this, the bank maintained its long-standing dividend payout policy. Management also noted that book value per share increased 7.1% year over year to $38.08, and that total shareholder return outpaced a proxy peer group by a factor of three, underscoring the tangible impact of both earnings growth and capital actions.

Recurring Wealth Management Fees Add Diversified Revenue

Wealth management remains an increasingly important contributor to TrustCo’s revenue mix. Assets under management stood at approximately $1.27 billion at year-end 2025, and wealth management and financial services fees now account for about 44% of non-interest income. Importantly, these fee streams are largely recurring, providing a stable, non-spread-based revenue component that can help cushion earnings against interest rate cycles. Management highlighted this franchise as a strategic asset that strengthens the bank’s customer relationships and overall profitability profile.

Expense Control and Efficiency Improvements

Despite an inflationary backdrop, TrustCo demonstrated solid cost discipline. Total non-interest expense, net of other real estate (ORE), fell to $26.5 million, down $1.5 million from the prior year. ORE costs also improved, with net expense at $161,000 versus $476,000 a year earlier. Management framed this as the result of ongoing efficiency efforts and tight control over operating costs. While the bank has guided to higher recurring expenses in 2026, executives suggested they are entering that period from a position of strength, with a lean cost base relative to the size of the franchise.

Credit Performance: Recoveries and Minimal Charge-offs

Credit quality metrics remained largely favorable. The bank posted net recoveries of $14,000 for the quarter, following net recoveries of $176,000 in the prior quarter and $457,000 over the past year, indicating that prior credit issues are being resolved rather than worsening. Provision for credit losses for 2025 was modest at $400,000, reflecting management’s view that the portfolio is performing well. These figures support the narrative that, despite modest upticks in problem assets, the overall credit environment for TrustCo remains benign.

Non-Performing Loans Tick Higher but Stay Low

Non-performing loans increased to $20.7 million from $18.8 million a year ago, nudging the ratio of NPLs to total loans up to 0.39% from 0.37%. Non-performing assets similarly rose to $22.1 million from $21.0 million. While these changes point to some incremental stress, levels remain low by historical and industry standards. Management acknowledged the increase but did not signal any broad-based deterioration, characterizing the movement as manageable within the context of a growing loan book.

Allowance Coverage and Capital Ratios Edge Lower

One of the more cautious notes on the call was the decline in the allowance for credit losses and coverage ratio. The allowance fell to $52.2 million from $58.2 million, with coverage of non-performing loans slipping to 253% from 267% a year earlier and 281% in the prior quarter. Additionally, the consolidated equity-to-assets ratio edged down to 10.66% from 10.84%. Executives framed these shifts as deliberate capital and reserve optimization in light of solid credit performance, but investors may watch these metrics closely as the credit cycle matures.

Branch Network Challenges and Strategic Footprint

TrustCo’s branch network contracted by two locations during the period, and management detailed challenges in executing planned expansion, particularly in Pasco County, Florida. Difficulty finding suitable sites has slowed branch growth in that target market. While not a major earnings driver near term, the update highlights the practical hurdles of physical expansion and underscores that the bank’s growth strategy will rely more heavily on deepening existing relationships and digital channels in the interim.

Weakness in Installment Loans

Within the loan portfolio, installment loans were a notable weak spot, declining $2.4 million, or 17.3%, year over year. Management did not portray this as a strategic concern on the same level as core residential or commercial lending, but the pullback suggests either softer demand or tighter underwriting in this segment. For investors, this signals that growth is not uniform across all consumer categories and that TrustCo is willing to let less attractive segments shrink rather than chase volume.

Forward-Looking Guidance and Strategic Priorities

Looking ahead, TrustCo guided 2026 recurring non-interest expense (excluding ORE) to a range of $27.7 million to $28.2 million per quarter and indicated they expect to operate toward the lower end. Other real estate expense is targeted to remain contained, not exceeding $250,000 per quarter. The bank renewed its share repurchase program for 2026, authorizing buybacks of up to 2,000,000 shares, and reiterated its commitment to maintaining its longstanding dividend. Management also emphasized their intention to keep deposit offerings competitive to sustain loan growth and further margin expansion. Collectively, this guidance points to a strategy of balancing disciplined cost growth, continued capital return, and steady balance sheet expansion.

In summary, TrustCo Bank Corp NY’s earnings call showcased a bank delivering strong earnings growth, margin expansion, and disciplined loan and deposit growth, while returning substantial capital to shareholders. Although there are emerging pressure points—such as higher non-performing assets, slightly thinner reserve coverage, modestly lower capital ratios, and a guided step-up in expenses—management’s tone suggested these are manageable within a fundamentally healthy franchise. For investors, the story remains one of solid core performance with a watchful eye on credit and cost trends as the next phase of the cycle unfolds.